Canasil Resources Inc. — Interim / Quarterly Report 2021

Aug 26, 2021

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CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars

Unaudited

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NOTICE OF NO AUDITOR REVIEW OF INTERIM FINANCIAL STATEMENTS

Under National Instrument 51-102, Part 4, subsection 4.3(3)(a), if an auditor has not performed a review of the Company’s interim financial statements, they must be accompanied by a notice indicating that the financial statements have not been reviewed by an auditor.

The accompanying unaudited condensed interim consolidated financial statements of the Company have been prepared by, and are the responsibility of, the Company’s management.

The Company’s independent auditor has not performed a review of these financial statements in accordance with the standards established by the Chartered Professional Accountants of Canada for a review of interim financial statements by an entity’s auditor.

“Bahman Yamini” “Kerry Spong”

President and Chief Executive Officer Vice President, Finance & CFO

August 25, 2021

1760-750 West Pender Street, Vancouver, B.C. V6C 2T8 Tel: (604) 708-3788 Fax: (604) 708-3728 Email: admin@canasil.com

CANASIL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED BALANCE SHEETS

Expressed in Canadian Dollars Unaudited

ASSETS	June 30, 2021 December 31, 2020 $ 601,593 $ 926,340 123,550 93,519 33,955 24,502
Current Cash and cash equivalents Receivables Prepaid expenses Reclamation bonds Right-of-use asset – office (Note 7) Property and equipment
	759,098 1,044,361 47,000 47,000 9,963 29,889 70,129 75,065
	$ 886,190 $ 1,196,315
LIABILITIES
Current Accounts payable and accrued liabilities Current portion of lease liability_(Note 7)_ SHAREHOLDERS’ EQUITY	$ 63,369 $ 96,413 11,759 34,254
	75,128 130,667
Share capital(Note 4) Contributed surplus Accumulated other comprehensive income Deficit	24,577,339 23,797,739 6,909,499 6,774,331 624,830 624,830 (31,300,606) (30,131,252)
	811,062 1,065,648
	$ 886,190 $ 1,196,315

Nature and continuance of operations (Note 1)

ON BEHALF OF THE BOARD:

”Alvin Jackson” , Director “Michael McInnis” , Director

• the accompanying notes are an integral part of these financial statements -

CANASIL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Expressed in Canadian Dollars

Unaudited

	Number of Shares Share Capital (Note 4) Contributed Surplus Accumulated Other Comprehensive Income Deficit Total
Balance – December 31, 2019 Private placement - units Share issuance costs Share-based compensation_(Note 5) Comprehensive income for the period Balance – June 30, 2020 Private placement - units Share issuance costs Exercise of stock options Fair value of stock options exercised Share-based compensation Comprehensive loss for the period Balance – December 31, 2020 Private placement - units Share issuance costs Share-based compensation(Note 5)_ Comprehensive loss for the period Balance – June 30, 2020	104,206,622 $ 21,837,835 $ 6,484,218 $ 624,830 $ (28,073,302) $ 873,581 5,087,500 407,000 - - - 407,000 - (9,694) - - - (9,694) - - 93,731 - - 93,731 - - - - (716,613) (716,613)
	109,294,122 22,235,141 6,577,949 624,830 (28,789,915) 648,005 7,827,500 1,565,500 - - - 1,565,500 - (33,956) - - - (33,956) 350,000 21,000 - - - 21,000 - 10,054 (10,054) - - - - - 206,436 - - 206,436 - - - - (1,341,337) (1,341,337)
	117,471,622 23,797,739 6,774,331 624,830 (30,131,252) 1,065,648 7,900,000 790,000 - - - 790,000 - (10,400) - - - (10,400) - - 135,168 - - 135,168 - - - - (1,169,354) (1,169,354)
	125,371,622 $ 24,577,339 $ 6,909,499 $ 624,830 $ (31,300,606) $ 811,062

• the accompanying notes are an integral part of these financial statements -

CANASIL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF LOSS AND COMPREHENSIVE LOSS FOR THE THREE AND SIX MONTHS ENDED JUNE 30

Expressed in Canadian Dollars Unaudited

	For the Three Months Ended June 30 2021 2020	For the Six Months Ended June 30	For the Six Months Ended June 30
		2021	2020
Expenses Accounting and audit Depreciation - equipment Depreciation - right-of-use asset - office_(Note 7) Director fees Exploration and evaluation(Note 3) Foreign exchange loss Interest - lease liability(Note 7) Interest income Investor relations and promotions Legal fees Listing and filing fees Management fees Office services and supplies Salaries, wages and consulting Share-based compensation(Note 5)_ Shareholder communications Transfer agent fees Travel and accommodation Loss for the period before other item Gain on sale of equipment Comprehensive loss for theperiod	$ 10,526 $ 8,733 $ 3,356 433 9,963 9,962 9,000 9,000 213,763 84,648 846 2,728 466 1,745 (733) (2,206) 18,274 16,557 13,041 2,186 2,901 2,779 15,000 20,000 5,890 8,041 56,400 56,846 132,690 93,731 13,795 6,788 1,803 1,448 - -	19,494 $ 6,712 19,926 18,000 717,971 15,207 1,262 (1,181) 39,191 13,573 8,951 30,000 14,169 116,912 135,168 17,956 3,026 -	16,938 866 19,926 18,000 307,924 15,950 3,779 (5,082) 25,541 4,516 8,279 57,500 17,015 118,193 93,731 9,376 3,348 813
	506,981 323,419 - -	1,176,337 (6,983)	716,613 -
	$ 506,981 $ 323,419 $	1,169,354 $	716,613
Lossper share – basic and diluted	$ 0.00 $ 0.00 $	0.01 $	0.01

Weighted-average shares outstanding – basic and diluted 121,378,215 109,294,122 119,435,710 107,477,501

• the accompanying notes are an integral part of these financial statements -

CANASIL RESOURCES INC.

CONDENSED INTERIM CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30

Expressed in Canadian Dollars

Unaudited

CASH RESOURCES PROVIDED BY (USED IN)	2021 2020
Operating activities Loss for the period Items not involving cash Depreciation - equipment Depreciation - right-of-use asset - office Share-based compensation Gain on sale of equipment Changes in non-cash working capital Receivables Prepaid expenses Accounts payable and accrued liabilities Investing activities Proceeds on sale of equipment Purchase of equipment Financing activities Share capital issued for cash Share issuance costs Principal payments – lease liability Change in cash for the period Cash position - beginning of period Cashposition - end ofperiod	$ (1,169,354) $ (716,613) 6,712 866 19,926 19,926 135,168 93,731 (6,983) - (30,031) 13,430 (9,453) (5,854) (33,044) (23,775)
	(1,087,059) (618,289)
	6,983 - (1,776) -
	5,207 -
	790,000 407,000 (10,400) (9,694) (22,495) (19,264)
	757,105 378,042
	(324,747) (240,247) 926,340 818,015
	$ 601,593 $ 577,768

• the accompanying notes are an integral part of these financial statements -

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

1. NATURE AND CONTINUANCE OF OPERATIONS

Canasil Resources Inc. (“Canasil” or the “Company”) is a mineral exploration company incorporated in British Columbia with its head office located at 1760 – 750 West Pender Street, Vancouver, British Columbia. The Company is considered to be in the exploration stage with respect to its interests in mineral properties, which are located in Canada and Mexico. Based on the information available to date, the Company has not yet determined whether these properties contain ore reserves. The Company’s continuing operation is dependent upon the confirmation of reserves, the ability of the Company to obtain the financing necessary to maintain operations and successfully complete its exploration and development, and the attainment of future profitable production.

These condensed interim consolidated financial statements have been prepared in accordance with International Financial Reporting Standards (“IFRS”) on a going concern basis, which assumes that the Company will be able to realize its assets and discharge its liabilities in the normal course of operations for the foreseeable future. As at June 30, 2021 the Company had working capital of $683,970, which it considers to be insufficient to fund its overhead and currently planned exploration activities for the ensuing twelve months. Consistent with other junior exploration companies, the Company has no source of operating revenue, is unable to self-finance operations, and has significant cash requirements to meet its overhead and maintain its mineral interests. These material uncertainties cast significant doubt upon the Company’s ability to continue as a going concern. The Company has incurred operating losses since inception and as at June 30, 2021 had an accumulated deficit of $31,300,606.

These financial statements do not include adjustments to amounts and classifications of assets and liabilities that might be necessary should the Company be unable to continue. The continuing operations of the Company are currently dependent upon its ability to continue to raise adequate financing. While the Company has been successful in the past at raising funds, there can be no assurance that it will be - able to do so in the future. Additionally, the outbreak of the COVID 19 global pandemic adversely affected workforces, economies, and financial markets globally, leading to an economic downturn. It is not possible for the Company to predict the duration or magnitude of the adverse results of the outbreak and its effects on the Company’s business or ability to raise funds.

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION

Statement of compliance

These condensed interim consolidated financial statements have been prepared in accordance with IFRS as issued by the International Accounting Standards Board and applicable to the preparation of interim financial statements, including IAS 34, Interim Financial Reporting . These statements do not include all of the information and disclosures required by IFRS for annual financial statements. In the opinion of management, all adjustments and information considered necessary for fair presentation have been included in these financial statements.

These condensed interim consolidated financial statements follow the same accounting policies and methods of their application as the most recent annual financial statements and should be read in conjunction with the Company’s audited consolidated financial statements including the notes thereto for the year ended December 31, 2020. All financial information presented herein is unaudited. The Company’s board of directors approved these financial statements for issue on August 25, 2021.

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

2. SIGNIFICANT ACCOUNTING POLICIES AND BASIS OF PRESENTATION - continued

Basis of measurement

These condensed interim consolidated financial statements have been prepared under the historical cost convention, except for those items classified as fair value through profit and loss or fair value through other comprehensive income, using the accrual basis of accounting, except for cash flow information.

Principles of consolidation

These condensed interim consolidated financial statements include the accounts of the Company and its significant wholly-owned subsidiaries, CRD Minerals Corp., Minera Canasil S.A. de C.V., and Minera CRD S.A. de C.V. All significant inter-company transactions, balances, and unrealized foreign exchange translation gains or losses have been eliminated.

Foreign currency translation

The presentation currency of the Company and the functional currency of the Company and its subsidiaries is the Canadian dollar. Transactions in currencies other than the functional currency are recorded at rates approximating those in effect at the time of the transactions. Monetary items are translated at the exchange rate in effect at the balance sheet date and non-monetary items are translated at historical exchange rates. Translation gains and losses are reflected in profit or loss for the period.

3. EXPLORATION AND EVALUATION

The Company expenses costs relating to the exploration and evaluation of its mineral properties in the period incurred. A description of the Company’s mineral interests follows:

La Esperanza project, Mexico

During 2006, the Company entered into an option agreement to earn a 100% interest in certain claims within the La Esperanza project area, subject to a net smelter returns royalty (“NSR”) of up to 1%. The claims are located in Zacatecas State, Mexico. The Company acquired a 100% interest in these claims in May 2011 and purchased the NSR in 2016. From 2006 to 2010, the Company also added further claims, by direct staking, to increase the size of the project area.

Salamandra project, Mexico

The Salamandra project, located in Durango State, Mexico, was acquired through staking as well as the purchase of a 100% interest in certain claims comprising the central area of the project, which are subject to a 0.5% NSR that can be purchased from the owner for US$500,000.

Nora project, Mexico

The Company holds a 100% interest in the Nora project, located in Durango State, Mexico, which was acquired through staking.

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

3. EXPLORATION AND EVALUATION - continued

Sandra-Escobar project, Mexico

Between 2004 and 2006, the Company acquired, by staking, the Sandra claims located in Durango State, Mexico and in 2012 earned a 40% interest in the contiguous Escobar claims held by Pan American Silver Corp. (“Pan American”). In addition to these claims, the Company also acquired various other claims in the area from third parties, all of which formed the Sandra-Escobar project.

In January 2017, Orex Minerals Inc. earned a 55% interest in the project and in June 2019, the Company sold its interest in the project to Pan American for $2,000,000 plus a 2% net smelter returns royalty interest (“NSR Royalty Interest”) payable on Pan American’s share of the project; the NSR Royalty Interest can be reduced to 1% upon payment of $4,000,000 to the Company.

Other projects

Mexico

The Company has staked other claims located in Durango State, Mexico, which include the Colibri, Carina, and Vizcaino projects. The Company holds a 100% interest in these projects.

Canada

The Company has staked and holds claims in British Columbia, Canada, which include the Brenda, Lil, Vega, and Granite projects. The Company holds a 100% interest in these projects.

Expenditures

Expenditures for the periods ending June 30, by activity, are as follows:

	2021 2020
Administration Assays Consulting Drilling Environmental and permitting Field costs Geological Land holding costs Legal Mapping and surveying Road building Transportation and rentals	$ 62,930 $ 66,460 9,787 - - 4,054 142,647 - 6,231 - 76,281 5,129 118,327 72,076 265,926 146,077 - 3,784 7,908 - 24,736 - 3,198 10,344
	$ 717,971 $ 307,924

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

3. EXPLORATION AND EVALUATION - continued

Expenditures - continued

Expenditures for the periods ended June 30 and cumulative expenditures to June 30, 2021 are as follows:

s follows:
	Expenditures 2021 Expenditures 2020 Cumulative 2021
Brenda, Canada - Expenditure recoveries Vega, Canada - Expenditure recoveries Other, Canada - Expenditure recoveries La Esperanza, Mexico - Expenditure recoveries - Option payments received Salamandra, Mexico - Expenditure recoveries - Option payments received Nora, Mexico Other, Mexico - Expenditure recoveries - Option payments received	$ 4,570 $ 11,800 $ 2,426,341 - - (225,773) 15,057 179 398,059 - - (75,190) 2,032 400 144,856 - - (22,776) 581,449 82,442 4,494,155 - - (262,373) - - (300,000) 32,373 36,022 6,409,252 - - (223,652) - - (553,989) 34,441 111,520 1,189,289 48,049 65,561 3,242,706 - - (131,346) - - (133,471)
	$ 717,971 $ 307,924 $ 16,376,088

Mineral title

Title to mineral properties involves certain inherent risks due to the difficulties of determining the validity of certain claims as well as the potential for problems arising from the frequently ambiguous conveyancing history characteristic of many mineral properties. The Company has investigated title to all of its mineral properties and, to the best of its knowledge, title to all of its properties is in good standing.

4. SHARE CAPITAL

The Company’s authorized share capital consists of an unlimited number of voting common shares without par value.

In March 2020, the Company completed a non-brokered private placement by issuing 5,087,500 units at a price of $0.08 per unit for gross proceeds of $407,000. Each unit consisted of one common share and one share purchase warrant entitling the holder to purchase one additional common share of the Company at a price of $0.12 per share for a period of two years. The warrants are subject to an acceleration clause should the closing price of the Company’s shares exceed $0.25 per share for a period of 20 consecutive trading days. The Company paid finders’ fees of $3,720 on a portion of the placement as well as legal and filing fees of $5,974.

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

4. SHARE CAPITAL - continued

In July 2020, the Company completed a non-brokered private placement by issuing 7,827,500 units at a price of $0.20 per unit for gross proceeds of $1,565,500. Each unit consisted of one common share and one-half of one two-year share purchase warrant. Each whole warrant entitles the holder to purchase one additional common share of the Company at a price of $0.25 per share in the first year or $0.30 in the second year following closing of the offering. The warrants are subject to an acceleration clause should the closing price of the Company’s shares exceed $0.50 per share for a period of 20 consecutive trading days. The Company paid finders’ fees of $21,900 on a portion of the placement as well as legal and filing fees of $12,056.

In December 2020, the Company issued 350,000 shares upon the exercise of stock options for proceeds of $21,000. The fair value of the options at the time of grant was estimated at $10,054 and this amount was transferred from contributed surplus to share capital upon exercise of the warrants.

In May 2021, the Company completed a non-brokered private placement by issuing 7,900,000 units at a price of $0.10 per unit for gross proceeds of $790,000. Each unit consisted of one common share of the Company and one-half of one two-year share purchase warrant. Each whole warrant entitles the holder to purchase one additional common share at a price of $0.15 during the first year or $0.20 during the second year following the closing of the offering. The warrants are subject to an acceleration clause should the closing price of the Company's shares exceed $0.25 per share for a period of 20 consecutive trading days. The Company paid finders’ fees of $5,700 on a portion of the placement as well as filing fees of $4,700.

5. STOCK OPTIONS AND WARRANTS

Stock option and share purchase warrant transactions are summarized as follows:

	Warrants	Warrants	Options
	Number	Weighted Average Exercise Price	Number Weighted Average Exercise Price
Outstanding, December 31, 2019 Expired/amended Amended Exercised Issued/granted Issued/granted Outstanding, December 31, 2020 Expired Issued Granted Granted Outstanding, June 30, 2021	2,309,250 (2,309,250) - - 5,087,500 3,913,750 9,001,250 - 3,950,000 - - 12,951,250	$ 0.25 $ 0.25 $ - $ - $ 0.12 $ 0.25 $ 0.18 $ - $ 0.15 $ - $ - $ 0.17	7,240,000 $ 0.10 (4,600,000) $ 0.06 4,600,000 $ 0.11 (350,000) $ 0.06 1,750,000 $ 0.08 250,000 $ 0.11 8,890,000 $ 0.13 (400,000) $ 0.21 - $ - 200,000 $ 0.15 1,900,000 $ 0.15 10,590,000 $ 0.13
Exercisable, June 30, 2021	12,951,250	$ 0.17	10,490,000 $ 0.13

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

5. STOCK OPTIONS AND WARRANTS - continued

At June 30, 2021, the Company had outstanding stock options and warrants enabling holders to acquire common shares as follows:

n shares as follows:
Number of Shares	Exercise Price Expiry Date
Options 1,155,000 735,000 1,750,000 250,000 4,600,000 200,000 1,900,000	$ 0.20 January 20, 2022 $ 0.20 January 25, 2022 $ 0.08 May 22, 2025 $ 0.11 November 9, 2025 $ 0.11 December 21, 2025 $ 0.15 March 31, 2023 $ 0.15 May17,2026
10,590,000
Number of Shares	Exercise Price ExpiryDate
Warrants 4,250,000 837,500 3,913,750 3,950,000	$ 0.12 March 5, 2022 $ 0.12 March 11, 2022 $ 0.25 July 31, 2022_(i) $ 0.15 May17,2023 (ii) _
12,951,250

(i) Exercise price increased to $0.30 per share on July 31, 2021. (ii) Exercise price increases to $0.20 per share on May 17, 2022.

At June 30, 2021, the weighted-average remaining life for the outstanding stock options was 3.70 years and 1.17 years for the outstanding warrants.

Share-based compensation

The following table presents information relating to incentive stock options granted to directors, officers, employees, and consultants of the Company during the periods ended June 30. Share-based compensation is recorded over the vesting period.

Total options granted Average exercise price Estimated fair value of options granted Estimated fair value per option	2021 2020
	2,100,000 1,750,000
	$ 0.15 $ 0.08 $ 137,480 $ 93,731 $ 0.07 $ 0.05

CANASIL RESOURCES INC.

NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2021

Expressed in Canadian Dollars Unaudited

5. STOCK OPTIONS AND WARRANTS - continued

Share-based compensation - continued

The fair value of the share-based compensation to be recognized in the accounts has been estimated using the Black-Scholes Option-Pricing Model with the following weighted-average assumptions:

		2021		2020
Risk-free interest rate		0.88%		0.37%
Expected dividend yield		0.00%		0.00%
Expected stock price volatility		86%		97%
Expected forfeiture rate		0.00%		0.00%
Expected option life in years		4.71		5.00
he Company has recorded share-based compensation as follows:
		2021		2020
Number of options vested in period		2,000,000		1,750,000
Compensation recognized in period	$	135,168	$	93,731

The Company has recorded share-based compensation as follows:

6. RELATED PARTY TRANSACTIONS AND KEY MANAGEMENT COMPENSATION

The Company had transactions with related persons or corporations, which were undertaken in the normal course of operations. Key management includes officers and non-executive directors. The compensation paid or payable to key management for the periods ended June 30 is as follows:

	2021 2020
Salaries Management fees Director fees	$ 112,500 $ 112,500 30,000 57,500 18,000 18,000
	$ 160,500 $ 188,000

In addition, the Company recorded share-based compensation of $77,913 (2020 - $48,204), which relates to incentive stock options granted to directors and officers. Share-based compensation is a non-cash item calculated using the Black-Scholes Option-Pricing Model with the assumptions detailed in Note 5.

7. RIGHT-OF-USE ASSET AND LEASE LIABILITY

The Company has a lease agreement for its office premises that expires September 30, 2021 and contains no renewal clause. Current monthly payments are $3,956 and include basic rent and a pro rata share of common operating costs.

JUNE 30, 2021 Expressed in Canadian Dollars Unaudited

CANASIL RESOURCES INC. NOTES TO CONDENSED INTERIM CONSOLIDATED FINANCIAL STATEMENTS

7. RIGHT-OF-USE ASSET AND LEASE LIABILITY - continued

On January 1, 2019, the date of initial application under IFRS 16, the Company recorded this agreement as a lease liability with an initial measurement equal to the present value of the remaining lease payments using the Company’s estimated incremental borrowing rate. The lease liability is subsequently measured at amortized cost using the effective interest rate method and adjusted for interest and principal. The right-of-use asset has been measured at an amount equal to the initial lease liability and is subsequently depreciated on a straight-line basis over the remaining term of the lease.

Details of the right-of-use asset for the period are as follows:

Balance – beginning of period Depreciation Balance – end of period etails of the lease liability for the period are as follows: Balance – beginning of period Lease payments Interest portion Less: current portion Balance – end of period	2021 2020
	$ 29,889 $ 69,742 (19,926) (19,926)
	$ 9,963 $ 49,816
	2021 2020
	$ 34,254 $ 74,295 (23,990) (23,257) 1,495 3,993
	11,759 55,031 (11,759) (43,272)
	$ - $ 11,759

Details of the lease liability for the period are as follows:

Accrued interest payable on the lease liability to June 30, 2021 totalled $116 (2020 - $543). Undiscounted payments remaining under the lease agreement total $11,995.

8. SEGMENTED INFORMATION

The Company currently operates in only one operating segment, that being the mineral exploration industry. The Company operates in the following geographical locations:

June 30, 2021		Canada		Mexico		Total
Property and equipment	$	3,004	$	67,125	$	70,129
Right-of-use asset–office	$	9,963	$	-	$	9,963
December 31, 2020		Canada		Mexico		Total
Property and equipment	$	3,584	$	71,481	$	75,065
Right-of-use asset–office	$	29,889	$	-	$	29,889